Why Social Media Marketing is Still the Best Value & the “Experts” Have it All Wrong

Is social media an expense or an investment? As a social media management firm, part of our job is to keep clients informed about all their options. One of the most common questions presented by inquiring small business owners is the “cost” of conducting a social media marketing campaign. It’s an understandable question and one which deserves a serious answer before expecting anyone to plop down their hard-earned dollars. On the other hand, there is a LOT of confusion and outright chaos surrounding the true cost…and actual value… of social media marketing even among many so-called “experts”. Today we are going to explain why social media marketing is still the best value around and why the experts have it all wrong!

Expense vs Investment

Perhaps the biggest misperception surrounding social media marketing is the idea that it is an expense when it’s actually much more like an investment. Let’s take a quick look at the difference between an expense and an investment to see if this holds true…

An investment provides a return on money. An expense doesn’t.  For example, a business owner might “invest” in the purchase of new equipment in order to serve more clients and make more money therefore new equipment would be considered an investment. On the other hand, the same business owner might incur greater expenses such as energy costs; a necessary part of doing business that does not generate any additional revenue or profits.

So, does social media marketing act more like an expense or an investment? Well, it is becoming a required part of doing business but it is also able to generate more profits, sales and even save money via marketing efforts, increased awareness and decreased costs associated with support, printing and traditional advertising methods. In fact, recent research conducted by Syncapse has updated the value of each “friend” or “follower” to reflect the following:

  • Facebook Fans – Worth an average of $136 (with a range from 0 to over $270)
  • Twitter Followers – Worth an average of $2 each
  • Pinterest – Worth an average of $5 each

What does this mean for business owners? Simple. To calculate the “cost” of social media it is first necessary to subtract the value of each client, savings associated with reduced printing/television or other advertising and other associated expenses.

One Time Investment versus Ongoing Advertising Cost

Terrific, so we have already demonstrated how social media marketing acts more like an investment than an expense and how it is even able to provide an average “value” for each connection. Now it’s time to take an even closer look at the difference between social media marketing and traditional marketing. Once again, even many experts have it wrong because unlike traditional mailers, television commercials, newspaper advertisements and other campaigns…social media establishes an ongoing relationship that keeps on going and going and going. All the other options require a business to keep spending money month after month in order to get the word out but social media allows a business owner to connect with a client once and retain access almost indefinitely. There is literally no other advertising method able to establish long term (lifetime!) relationships with clients for a one-time investment. What is the value of establishing a relationship versus a one-time advertisement? Frankly, it’s simply too early to tell; social media marketing is only a few years old so even the current value of each client is subject to change over the lifetime relationship with each new contact. However, there are a few indications which demonstrate the total lifetime value may far exceed even the wildest expectations of social media management firms! For example, mega sites like Amazon.com have found their Facebook fans spend (on average) DOUBLE that of a non-fan during the Christmas season alone. Best Buy was even higher! Target and Walmart also demonstrated impressive results with all leading retail brands citing increased expenditures correlated to social media status of the client. Perhaps most impressive of all…the increased spending behavior correlated to both online AND offline purchasing power!

So, what does this mean for business owners? To calculate the real value of social media marketing, try this exercise out…

1.  Calculate the value of a traditional client by adding up the total amount spent then subtracting the traditional acquisition and retention costs.

2.  Calculate the value of a social media client. Remember, in general they tend to spend as much as double that of a traditional client. Now add up the acquisition cost (one time) and retention costs (minimal).

3.  Compare the two! We already know that social media clients tend to spend more (substantially more) and require less to acquire and retain than traditional clients. But double spending only tells half the story; decreased cost is able to increase profits substantially more.’

4.  Repeat. Here is where it gets really exciting! The first three steps typically demonstrate pretty impressive results but when you consider the reduced cost of future advertising, retention and marketing made possible by the ongoing relationship of social media…it’s clear the social media client represents a gold-mine of future profits.  Traditional clients must be courted repeatedly with expensive advertising and other costly features just to make a less valuable sale.

Really want to see profits explode? Work closely with your social media management firm to discover which clients represent the top 20% of sales, client testimonials and shared reviews! These powerhouse consumers are the lifeblood of every business; by putting the Pareto Rule to work, your social media marketing campaign can create lifelong clients for a fraction of the time and money typically required by traditional measures.

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